Peter Egan Chief Executive Officer Yvonne Monaghan Chief Financial Officer Tim Morris Group Financial Controller Final Results 12 months ended 31 December 2018
2018 Final Results Highlights “Our strategy of driving the quality of growth organically by investing in our operations, coupled with selective acquisitions, has delivered another strong year of substantial growth.” 2
2018 Final Results Highlights Financial Highlights Another consistent and strong financial performance • Revenue up 10.4% to £321.1m; organic growth of 7.8% Revenue up • Adjusted operating profit up 6.2% to £46.0m 1 10.4% • Adjusted profit before taxation up 7.1% to £42.5m 1 • Adjusted diluted earnings per share up 6.9% to 9.3p 1 • Proposed final dividend of 2.1p, making a full year dividend of 3.1p (2017: 2.8p) • Net debt to adjusted EBITDA ratio of 1.6x (2017: 1.6x) Strategic Highlights Adj. PBT up Highly focused textile services business with increasing geographical coverage 7.1% • South West Laundry acquisition extends HORECA coverage to the West Country • Planned new high volume linen plant in Leeds on track for first half of 2020 • Appointment of Peter Egan as CEO from 1 January 2019 Investment Highlights Continuing capital investment to increase production capacity and efficiency Adj. EPS up • Major investments completed across the businesses 6.9% • 2019 investment accelerated into Q1 to ensure the business can support the high level of organic new sales • New and increased bank facilities to support next stages of growth Notes: 3 1. Before amortisation of intangible assets (excluding software amortisation), exceptional items and, in the case of earnings per share only, associated taxation
2018 Final Results Income Statement 2018 2017 Increase Revenue (£m) 321.1 290.9 10.4% Adjusted operating profit (£m) 1 46.0 43.3 6.2% Adjusted operating margin (%) 1 14.3 14.9 n/a Exceptional items (£m) (0.6) (0.5) n/a Adjusted PBT (£m) 1 42.5 39.7 7.1% Adjusted EPS (p) 1 9.3 8.7 6.9% Number of shares used in EPS calc 2 369.6 369.0 n/a Dividend (p) 3.1 2.8 10.7% Notes: 1. Before amortisation of intangible assets (excluding software amortisation), exceptional items and, in the case of earnings per share only, associated taxation 4 2. Basic number of shares of 366.5m for 2018. Shares in issue at 01/03/2019 was 367.7m.
2018 Final Results Cash Flow £m 2018 2017 Adjusted operating profit 46.0 43.3 Depreciation and software amortisation 55.4 49.0 Working capital (5.9) (0.8) Capital expenditure – fixed assets and software (18.1) (16.5) – rental stocks (net) (46.7) (41.0) – fixed asset proceeds 0.2 0.2 Interest (3.5) (2.8) Tax (7.8) (6.9) Dividends (10.7) (9.5) Additional pension contributions (1.9) (3.4) Other 0.6 (0.5) Net cash inflow 7.6 11.1 Equity issue (net) 0.7 0.3 Discontinued operations (0.1) (0.3) Acquisitions / Disposals (15.3) (4.2) Net debt (increase) / decrease (7.1) 6.9 Net debt 98.4 91.3 55
2018 Final Results ££ Investment Expenditure £18.1m £10.7m Key Projects in 2018 Southall (Stalbridge) £3.3m Edinburgh (PLS) £1.9m Chester (Afonwen) £1.1m Wrexham (Stalbridge) £0.9m Letchworth (Workwear) £0.8m Gateshead (Workwear) £0.4m 6
2018 Final Results Other Financial Information Return on Capital Employed (ROCE) Interest, Bank Facility & Hedging • Marginal increase to 16.3% (2017: 16.2%) Interest • Calculated as adjusted operating profit divided by the average • Interest cost (excluding notional pension interest) of £3.2m of opening and closing Shareholders’ equity, net debt and (2017: £3.2m) post-employment benefit obligations • Reduction in notional pension interest cost to £0.3m (2017: £0.4m) reflects pension deficit at the start of 2018; expected charge for 2019 is £0.1m Taxation Effective tax rate on adjusted profit before taxation 1 of 18.9% • Bank Facility (2017: 19.1%) • £135.0m RCF expiring August 2022 plus further £15.0m • Benefits from prior year adjustments and changes in UK tax expiring August 2019 rates offset by the impact of expenses not deductible for tax • RCF at LIBOR + applicable margin; average margin during 2018 was 1.72% (2017: 1.73%) and will be similar for at least Q1 2019 Pensions • Net pension deficit of £3.0m (Dec 2017: £8.9m) Hedging • Reduction due to deficit recovery contributions and net • Hedging arrangements: impact of increase in discount rate and assumed inflation rate - £10.0m at 0.55% to Jun 2019 • Deficit recovery contributions of £1.9m (2017: £1.9m) - £15.0m at 1.67% to Jan 2020 expected to continue to next valuation - £15.0m at 1.07% to Jan 2021 • Additional, one-off, payment of £1.5m made in April 2017 - £15.0m at 1.14% to Jan 2022 Note 1. Based on profit before taxation before amortisation of intangible 7 assets (excluding software amortisation) and exceptional items
2018 Final Results Delivery of Strategic Plan • Market leading position • Leading edge customer service • Delivery of operational efficiencies • Development of bespoke IT platforms • Maintaining margin over the medium term • Launch of a Group-wide brand recognition programme • New high volume linen site to be ready for first half 2020 • Investing in the training and development of our employees • Identification of further acquisitions in complementary geographies • Continued capital investment to increase production capacity & efficiency 8
2018 Final Results Acquisitions “The acquisition of South West Laundry was a welcome addition to our coverage for Stalbridge .” 9
2018 Final Results Acquisition of South West Laundry • Modern and well equipped facility, located in Hayle, Cornwall • Predominantly serves the HORECA market in the South West • Complements existing Stalbridge business; 175 miles from nearest plant • Processes some 340,000 pieces of linen per week • 100 employees • £5.1m revenue and £1.5m PBT in the year to February 2018 (excluding exceptional credit from insurance claim) • Terms of acquisition: £15.5m on a debt free, cash free basis 10
2018 Final Results Operational Performance “Another year of substantial organic growth with both Divisions delivering higher levels of new business wins and maintaining consistently high levels of customer satisfaction scores.” 11
2018 Final Results Operational Performance Workwear 2018 2017 Increase Revenue (£m) 128.8 122.4 5.2% Adjusted operating profit (£m) 1 22.7 21.1 7.6% Margin (%) 17.6 17.2 n/a Notes: 1. Before amortisation of intangible assets (excluding software amortisation) and exceptional items 12
2018 Final Results 17 2,250 375 1.3m Wearers Laundries Employees Vehicles 13
2018 Final Results Operational Performance Workwear • Record level of new sales wins • Underlying revenue growth of 5.2% • Increased sales to existing customers • Encouraging level of Direct Sales of £4.6m (2017: £3.5m) • Customer retention maintained at 95% • Production efficiencies and strong cost control led to further improvement in margin at 17.6% • Existing customer satisfaction at a high of 86% • Improved garment lead times for customers • Continued high levels of capital investment across the estate to increase capacity and efficiencies • Ongoing investment in training and development 14
2018 Final Results Operational Performance HORECA Hotel, Restaurant & Catering Linen High Volume Hotel Linen (HVL) 2018 2017 Increase Revenue (£m) 192.3 168.5 14.1% Adjusted operating profit (£m) 1 28.0 26.8 4.5% Margin (%) 2 14.6 15.9 n/a Notes: 1. Before amortisation of intangible assets (excluding software amortisation) and exceptional items 15 2. The margin in 2017 excluding the benefit from the work processed on behalf of a private laundry was 15.2%
2018 Final Results 17 3,400 390 8.5m Employees items Laundries Vehicles 16
2018 Final Results Operational Performance HORECA Hotel, Restaurant & Catering Linen High Volume Hotel Linen (HVL) • Overall revenue growth of 14.1% with all brands trading ahead of 2017 • Strong underlying revenue growth of 9.6% • Consistently high customer satisfaction rating • Stalbridge new sales significantly ahead of expectations • London Linen generating efficiencies from the capital investment in 2017 • HVL benefited from closure of small competitor in the Midlands • Number of large hotel contracts signed • HVL plants nearing capacity in the summer months but service maintained at a high level • Construction of new HVL laundry in Leeds has commenced - anticipated capital investment is £10.0m over 2 years - commissioned and on stream in first half of 2020 17
2018 Final Results Our Customers “Our continual investment in the business allows us to provide an excellent service to our customer base.” 18
2018 Final Results Our Customers 19
2018 Final Results Five Year History Revenue (£m) Adjusted Operating Profit (£m) 321.1 46.0 50 43.3 290.9 300 37.7 256.7 40 188.2 25.9 30 200 155.0 20.2 20 100 10 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Adjusted Diluted EPS (p) Dividend per Share (p) 9.3 10 3.5 3.1 8.7 2.8 7.6 3.0 8 2.5 2.5 5.8 2.1 6 4.8 1.7 2.0 1.5 4 1.0 2 0.5 0 0.0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 20
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